China fails to live up to its history as a great innovator

China, the birthplace of the compass, is still one of the world’s junior members as far as systems for protecting intellectual property rights are concerned.

istockphoto

PATTI WALDMIER

Financial Times

March 26, 2017May 30, 2013

China can claim to be the birthplace of some of the oldest and most important discoveries ever made on earth – gunpowder, the compass and papermaking among them.

However, it is still one of the world's junior members as far as systems for protecting intellectual property rights are concerned.

Patent filings have risen in recent years, partly because Beijing has declared that innovation is the key to building sustainable economic growth.

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Two years ago, China surpassed the United States to become the world's biggest filer of patent applications.

Patent experts inside and outside China say the impressive number of patent filings does not tell the whole story of the country's current levels of innovation. Their argument is that the growth in volume has not been matched by a similar growth in quality.

China's patent office says it received more than two million applications last year, and granted 1.25 million of these, but only 217,000 were of the highest quality in China's patent system.

China grants three types of patents, comprising those for "invention" and also patents that require a lower level of innovation. The latter are "utility model" and "design" patents.

Elliot Papageorgiou, a member of the EU Chamber of Commerce working group on intellectual property rights in China, calls utility model patents "patents lite."

"Compared with those steeple-crowned invention patents in developed countries, many of ours are patents that are for small improvements, utility models or design," Tian Lipu, director of the State Intellectual Property Office, said last month.

However, he added: "Something is better than nothing, and low-quality patents are much better than imitation or copyright infringement."

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The EU Chamber of Commerce recently published a study of Chinese patent quality, Dulling the Cutting Edge: How Patent-Related Policies and Practices Hamper Innovation in China. This shows patent filings have ballooned in recent years.

However, the EU study projects that by 2015, a key target date identified by China for the development of its patent system, "there might be over 2.6 million less-than-'highest-quality' patents filed in China." It estimates that the number of "highest-quality" patent filings in 2015 would be substantially lower. Furthermore, the gap between the two looks as though it will be widening, not closing.

The study forecasts that "39 per cent more total utility model applications than total invention patent applications [will be] filed in China in 2015, 28 percentage points more than the comparison rate between the two in 2011."

But some legal experts believe China's patent system, which relies heavily on grants for small or marginal innovations, is where it should be given its current stage of development.

Confucian tradition once encouraged the Chinese to share and even copy inventions, and the idea of protecting them as individual property is relatively recent, notes an article in a recent edition of The International Lawyer.

The EU Chamber of Commerce's Mr. Papageorgiou also says there is nothing "intrinsically bad" about China's utility model patent system.

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"For a developing economy it makes sense to have utility models," he says. "It gives small investors a chance to get onto the inventor's ladder."

The bigger problem is that various levels of government give monetary incentives for patent filings, which encourages low-quality or even worthless applications, he says.

The EU study goes on to conclude that despite marked improvements in China's patent laws in recent years, foreign companies still "do not typically file patents on breakthrough inventions in China."

This was "given the magnitude of the threat of Chinese entities to use illegally acquired [intellectual property rights] from foreign firms to very seriously jeopardize those companies' business operations, not just in China, but also abroad."

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